MALAYSIA

In the case of Malaysia, the government not only had to combat the full force of the crisis, it also had to deal with a growing policy quarrel between Prime Minister Dr. Mahathir Mohamed and Deputy Prime Minister Anwar Ibrahim, the former railing against the market, blaming Western currency speculators for impoverishing his country and the region as a whole and saying that currency trading should be banned, the latter championing the free market and supporting the IMF’s case of fiscal and monetary tightening. Mahathir fired his Deputy Anwar, who was subsequently arrested and convicted on several charges. The Governor and Deputy Governor of the central bank, Bank Negara Malaysia, resigned and the following week, on September 1998, Malaysia imposed capital and exchange controls, fixing the ringgit at 3.80 to the dollar and banning the offshore spot and forward ringgit markets. As a result of this, domestic liquidity increased, allowing interest rates to be lowered, thus reducing the debt service burden on the domestic corporate base and banking system, an important consideration given that Malaysia’s total debt to GDP at the time was around l6O Malaysia is currently undergoing a strong growth recovery and GDP growth is anticipated at 4.8 in 1999 and 5.0 in 2000 after a 7.5 contraction in 1998.